Free Trade Agreements

Sugar cane plantation. Khanh Hoa province. Vietnam
​​The fight of Filipino peasants such as the farmworkers of Hacienda Luisita and Lapanday Foods Corporation for land, food, and justice, stands to be further undermined once the Philippine government fully accedes to the China-backed mega Free Trade Agreement (FTA) Regional Comprehensive Economic Partnership (RCEP).
 
While the controversial Trans-Pacific Partnership (TPP) was seemingly put off by United States president Donald Trump, RCEP is now a major highlight in the currently Philippines-chaired Association of South East Asian Nations (ASEAN) meetings towards its 50th year summit in November this year. Millions of Filipino farmers will be among those at the losing end of the RCEP agreement which intends to remove all remaining protection over the Philippine economy towards unhampered trade and investment. Here are the reasons why:
 
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1. RCEP threatens the country’s food security. A Philippine Institute for Development Studies (PIDS)-funded study shows that rice production would sink by 4.3% as import volume rises by a huge 33.15% under RCEP.  Another PIDS study projects that Philippine rice import volume could increase by 100% from the current 2.2 million metric tons (MT) to 4.4 million MT from 2017 to 2022. This is especially when the Philippine quantitative restriction* (QR) on rice under the World Trade Organization’s (WTO) Agreement on Agriculture is lifted this July. 

 
Studies show that the income of already impoverished rice farmers will drop by 29% upon the lifting of the rice QR. This is because subsidized cheap rice imports will flood the domestic market, compete with local rice expensively produced by Filipino farmers who lack State support, and depress more the farmgate price of palay. The Philippines is among the five RCEP countries in the list of the world’s biggest rice importers.
 
Weakening rice production will lend to shrinking agricultural production. While palay used to account for almost one-fourth of the gross value added (GVA) in agriculture at current prices, its GVA has been falling by 10.4% annually from 2014 to 2016, contributing to overall agriculture decline of almost 1% yearly.
 
This trend will worsen with greater liberalization and a deluge of rice imports under RCEP and WTO. This will impact on the livelihood of close to 20 million Filipinos, or about a fifth of the national population, made up of 2.5 million small farmers, several hundred thousand farm laborers and other workers involved in the supply of farm inputs and machinery, milling/processing, warehousing, transport, other services, and related economic activities. It will impact on the entire nation’s food security, much more that of the direct food producers.
 
FTAs like RCEP will also open up countries’ natural resources further to foreign investments. Pushing amendments to the Philippine Constitution to make it attune to investment liberalization can lead to full foreign ownership of arable lands, converting more land supposedly devoted to food and other national needs to profit-seeking ventures of few big and foreign corporations, such as ecozones and tourism complexes. This will worsen the country’s food insecurity and make land distribution to farmers even more remote.
 

2. RCEP will pose a threat on poor Filipino farmers who rely on saving and exchanging seeds for their planting needs.  In Asia, it is said that farm-saved seeds account for as much as 90% of all seeds used in the region. But the long tradition of farmers of saving and freely exchanging seeds among themselves has been under relentless attack by big agribusinesscorporations promoting Intellectual Property Rights (IPR)-protected agrochemical-intensive seeds including the so-called high-yielding varieties (HYVs), genetically modified (GM) seeds, as well as hybrid seeds.

 
There are alarming proposals that may privatize farmers’ seeds through RCEP: first, Japan and Korea’s proposal that all RCEP countries join the UPOV 1991**; (2) Japan’s proposal to ‘criminalize’ seed saving; and (3) India’s proposal to codify traditional knowledge and make it available to patent offices. FTAs like RCEP allow corporations to rake in bigger corporate profit by displacing farmers’ seeds and replacing them with patented, commercial seeds that farmers have to buy. This will also mean more expenses and greater bankruptcy and poverty for farmers.
 

3. RCEP will further restrict the Philippine government from using policy and regulatory tools to promote national economic development.

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“Fair and equitable treatment” of foreign investors is one of the rights that negotiators want RCEP to guarantee. This pertains to a “standstill” on laws and regulations, according to critics of RCEP. It means that RCEP governments are not allowed to revise or amend their existing laws if it would harm the interest of RCEP investors.

 
This principle is problematic especially for underdeveloped countries like the Philippines. Many poor countries do not yet have the needed laws or a sufficient regulatory capacity to deal with emerging economic, environmental and other issues, to which they are more vulnerable, that may impact their development and people. For instance, RCEP will prevent the country from advancing a genuine agrarian reform program that would distribute land for free to tillers and institute sufficient support services to farmers and farmworkers as central to a genuinely people-centered development program.
 
It will also further prevent government from reversing neoliberal policies and programs that have been causing massive economic and social harm. Thus, RCEP can also hinder the Philippines from revoking trade and investment policies that have caused the deterioration of the agriculture sector and that currently opens the country’s land and agricultural resources for big and foreign corporations to plunder. 
 
Additionally, one of the contentious issues that have emerged in the RCEP negotiations is that of the investor-state dispute settlement (ISDS). With it, foreign corporations from RCEP countries could legally oblige RCEP governments to implement the deal’s provisions on investment protection and file charges before an international tribunal in case the latter fails to fulfill such obligation. Reports say that foreign investors can be considered to have won 67% of such cases against RCEP governments, but with the latter having to shell out for legal fees 70% of the time. For countries like the Philippines, whose poor majority are farmers and fisherfolk, the ISDS is not only another financial burden but an affront to the sovereign will of a nation to decide what is best for its people.
 

4. RCEP will not necessarily increase Philippine food and agriculture exports and will further undermine the country’s agriculture sector. Philippine trade officials claim that the Philippines would push for more exports of local goods in the RCEP to include agri-food commodities such as canned tuna, fresh pineapple, mango, garments of synthetic fibers, raw cane sugar, crude coconut oil, cut tobacco, bananas, coconut, copra, and cooking oil. But the country could not expect to increase exports or substantially gain from more trade liberalization. RCEP markets have already been opened up for Philippine productss in the past, but the country has not taken advantage of this so-called market openness. This is because the country’s weak manufacturing base and underdeveloped infrastructure continue to hamper any potential to improve production. In other words, the country needs to focus more its efforts on developing domestic production for domestic consumption, instead of the competitive yet uncertain markets.

 
Trade and investment liberalization has only seen the deterioration of the Philippine agriculture sector, increasing agricultural deficits and the deluge of foreign products to the detriment of the Filipino farmers. 
 
FTAs have not served the country’s development contrary to promise. Instead of agreeing to FTAs, the government should seriously consider breaking free from unequal agreements the Philippines is already in and refuse to be bound to more of the same.

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*Quantitative restriction (QR) limits rice importation into the Philippines to protect Filipino rice farmers and consumers
**UPOV 1991 or the 1991 Act of the International Union for the Protection of New Varieties of Plants is a set of common standards on how countries should implement plant variety protection. But it is biased towards seed companies whose patented varieties are protected, which farmers could not save nor exchange unless they pay or government allows it. 

Econ Sovereignty

IBON Foundation Statement for the Stakeholders’ Meeting of the Trade Negotiating Committee (TNC)18th Round of Negotiations on the Regional Comprehensive Economic Partnership (RCEP)
Manila, May 10, 2017

Our countries should not be prevented from implementing real development policies. After over three decades of globalization we need to reclaim our economic sovereignty, not erode this even further.

IBON Foundation welcomes this stakeholder engagement. However, as with many other civil society organizations (CSOs), we find the general secrecy surrounding the Regional Comprehensive Economic Partnership (RCEP) and the correspondingly very limited public participation to be very disappointing.

Our organizations are keen to analyze and discuss the terms of the RCEP for their far-reaching impact on tens of millions of Filipinos and hundreds of millions of others across RCEP negotiating countries. We have made many formal requests to various governments for copies of the negotiating text so that they could be analyzed and discussed among the workers, farmers, and other marginalized sectors. These requests are unheeded and we have had to rely on extremely sketchy information and on so-called leaked texts.

The consequent absence of meaningful participation is not consistent with the principles of democracy and inclusiveness that our governments often espouse.

Secondly, it is often argued that we have to enter free trade agreements (FTAs) or else be “left out” and lose out. This is a poor guide to economic policymaking. The measure of success is not of being able to avoid being “left out” but rather if economic development has been or is being achieved. That defeatist position has resulted in the Philippines steadily liberalizing and opening its markets over the last three decades. The negative Philippine experience is something that we invite our neighbours to learn from.

The Philippines is party to six (6) FTAs, one (1) bilateral FTA, various agreements under the multilateral World Trade Organization (WTO), and at least 31 bilateral investment treaties (BITs). These are aside from a whole range of market-oriented domestic laws and policies. These have made the country already more open than its neighbours in Southeast Asia in many aspects of foreign trade and investment.

These neoliberal policies have kept agriculture backward and caused it to decline to its smallest share of the economy in history. Filipino industry has been in decline for decades and is already a smaller share of the economy and employment than in the 1950s; some 20 firms have been closing on average every day since the 2000s. This has been compensated for by the bloating of a largely low value-added and low productivity service sector.

It has also resulted in the worst crisis of joblessness in the country’s history. There is unprecedented unemployment in the country especially if we also count all the discouraged workers who dropped out of the labour force from finding no work around. We estimate an unemployment rate of over 10% with over four (4) million unemployed Filipinos. On top of this is the greatly worsening quality of work – real wages have fallen to lower than they were fifteen years ago in 2001 and nearly two-thirds (63%) or 24.4 million of those employed are in non-regular, agency-hired, informal sector or unpaid family work. This severe domestic job scarcity has forced some 11-12 million overseas Filipino workers to find work abroad to support themselves or their families, suffering separation and a host of abuses.

All this while a few families have become even richer and a few large corporations have become even more profitable. This is very alarming. We don’t want more policies of inequality and underdevelopment.

Thirdly and overall, we then have serious reservations with RCEP which is a race to the bottom for countries to give the most favourable conditions for capital even at the expense of people and national development. Many of the specific areas of concern have already been well-articulated by colleagues from CSOs and people’s organizations. IBON has also submitted a position paper detailing the threats to Philippine agriculture (especially rice farmers) and industry, to people’s access to cheap generic medicines, and to farmers’ seeds.

We would like to add that Philippine economic policies are already shackled by profit-, market- and capital-driven trade deals and laws as it is. RCEP is an additional neoliberal shackle that is irrational and anti-development. RCEP is restrictive and for instance prohibits economic development policy measures listed as “performance requirements” or the use of trade barriers and other protections for domestic producers.

Yet such policies are exactly what RCEP negotiating countries China, Japan, South Korea, India and others have used to develop their industries to what they are today. Their positive experience with these is something that we should learn from. The double-standard for industrial policy and progress is already jarring — but the proposals for investor-state dispute settlement (ISDS) where corporations can bring our governments to secretive commercial courts for undertaking such measures in the national interest just make it worse.

Our countries should not be prevented from implementing real development policies. After over three decades of globalization we need to reclaim our economic sovereignty, not erode this even further.

For whom is RCEP? If it is so good for all, then the people should be brought in rather than kept in the dark. If the people are kept out, then this only underscores that RCEP is for the select few involved and not really for the people. ###

 

RCEP-V-TPP

Research group IBON urged Philippine negotiators to reject proposals that may further restrict the policy options of the country in regulating foreign trade and investment.

IBON made the appeal as it joined other cause-oriented groups in a dialogue today with trade officials from the Philippines and other countries that are negotiating the Regional Comprehensive Economic Partnership (RCEP) in Manila. It stressed that RCEP and other modern free trade agreements (FTAs) target whatever is left of poor countries’ sovereignty in national economic policy-making.

The group said that as an underdeveloped economy, the country needs flexibility and independence in policy making to ensure that the national interest is protected when dealing with foreign goods and capital.

IBON cited as example the proposals reportedly obliging RCEP members to freeze existing national foreign trade and investment laws and drop performance requirements on foreign corporations. The standstill on national laws is meant to guarantee that the Philippines will not reverse current policies that already allow the domestic entry of foreign goods and capital.

Performance requirements, meanwhile, are measures that government uses to compel foreign investors to fulfill certain conditions to operate in the country. These provisions are being discussed in the RCEP in the context of giving foreign investors a “fair and equitable treatment”.

But IBON argued that such proposals would further tie the hands of the Philippines in determining the appropriate policies and programs on foreign trade and investment. It pointed out that a standstill on national laws under RCEP would deprive the country of the policy option to reverse or even just scale back its aggressive liberalization.

Under RCEP, for instance, among those expected to be hit hard is rice with local production declining amid a massive surge in imports. But a standstill on current policies on rice including the lifting of quantitative restrictions by July this year under the World Trade Organization (WTO) would prevent any meaningful intervention from government to protect this socially sensitive sector. Almost 20 million Filipinos who directly or indirectly rely on the rice industry including 2.5 million small palay farmers would be affected.

In addition, the planned restriction on the use of performance requirements under RCEP would undermine more the capacity of government to regulate foreign investments in a manner that serves the local economy. Performance requirements include policies such as requiring foreign investors to source locally produced goods; to export commodities only after substantial domestic processing; and to hire and train local technical people, among others. These requirements ensure that foreign capital helps build linkages in the local economy, helps strengthens rather than stunts domestic industries, and transfer technology and know-how.

IBON emphasized that investment regulation is just one of the many issues and concerns that the public must raise with the country’s trade negotiators in RCEP. Four decades of liberalization should give more than enough insights and lessons for the Philippine government to seriously reexamine the proposed regional FTA, the group said. ###

​IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.

Photo from New Vision

 

Research group IBON today asked the Philippine government and other members of the Association of Southeast Asian Nation (ASEAN) to rethink plans of further deepening economic liberalization. This has only caused unprecedented production decline, poverty and joblessness while undermining national sovereignty, development planning, and public welfare and interest in the country and region.

IBON made the appeal as members of the ASEAN began their three-day meeting on the proposed Regional Comprehensive Economic Partnership (RCEP) in Bohol. The Inter-sessional RCEP Trade Negotiating Committee meeting is one of the events organized this month by the ASEAN to be held until April 21 leading up to the 30th ASEAN Summit that opens on April 26.

The 10-member ASEAN and its free trade agreement (FTA) partners China, Japan, South Korea, India, Australia, and New Zealand have been negotiating the RCEP to harmonize their already liberalized markets for goods and services as well as set uniform rules on investments, migration, intellectual property, dispute settlement and investment protection, among others.

IBON pointed out that decades of liberalization under previous FTAs and other neoliberal reforms in the economy have resulted in the underdevelopment of the Philippine industrial sector and the devastation of agriculture. The deluge of imported goods stunted the manufacturing sector, which in 2016 comprised just 23.2% of the gross domestic product (GDP) from 24.5% in 2000. Agriculture (with hunting, forestry and fishing) declined from an already low 14.0% to 8.7% of GDP during the same period as foreign agricultural products continued to flood the domestic market.

But what is even more distressing for the economy and national development under so-called new generation FTAs like RCEP are their institutionalization of rules that will make it even more difficult, if not impossible, for poor countries like the Philippines to implement policies that will develop its local industries and protect public interest, IBON said.

For instance, the group noted that the controversial investor-state dispute settlement (ISDS) provisions of the now-derailed Trans-Pacific Partnership (TPP) is reportedly being introduced in the RCEP mainly by the rich negotiating countries like Japan and Australia. This would allow foreign investors from other RCEP members to sue the Philippine government at an international tribunal for implementing laws that are deemed unfavorable to their commercial interests, argued IBON.

Aside from the practically unlimited monetary burden that such litigation will entail, the ISDS will also further weaken the country’s sovereignty to regulate investments in a manner that serves the national interest and public welfare. For instance, government could not just impose a mining ban to protect the environment without risking an expensive ISDS case filed by say an affected Australian mining firm, the group said.

There are other provisions in the RCEP that are deemed unfavorable to the Filipino people and of other ASEAN countries. Threat of more expensive medicine looms due to its reported provisions on intellectual property rights (IPR) that will allow extended patents on important and life-saving medicines. To illustrate, the cost of patented medicines to treat HIV/AIDS – now considered a “youth epidemic” in the country – is said to be more that 220 times the price of the generic version.

For Filipino farmers, RCEP’s IPR provision means even more expensive seeds that will contribute to their bankruptcy. When approved, RCEP will require the Philippines to join the 1991 UPOV Convention that essentially privatizes seeds and requires farmers to pay royalties for commercial seeds and bans farmers from exchanging with each other commercial seeds that they have saved from a harvest.

IBON also warned that these questionable and contentious provisions are not even being debated publicly as RCEP negotiations, like in other FTAs, are being held behind closed doors and shut down any meaningful public participation. The secrecy of the talks also means that there may be other provisions of the RCEP that are detrimental to the economy and the people but have not been exposed yet. ###

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